Question

Suppose that the government wishes to decrease the market equilibrium monthly rent by increasing the supply of housing. Assuming that demand remains unchanged, by how many additional units of housing would the government need to supply to get the market equilibrium rental price to fall to $1,500 per month?

Answer 1

Answer: 2500 units

Explanation: Since government plans on reducing the market equilibrium rent to $1500 per month, it's required of the govt. to extend the provision of apartments by 2500 units.

The equilibrium rent is $2000 and also the equilibrium quantity is 12,500 units. If 2500 more units were added by the govt. this might cause a rise of 15,000 unit available for rent within the market.

The equilibrium price would now be $1500 (the rent the govt. is trying to achiev.) and also the equilibrium quantity 15,000 units